Oman Excise Tax, VAT in Oman

Oman Imposes Excise Tax

Oman recently announced that excise tax will be implemented as of 15th June 2019, this move is to assist the country in expanding their revenue streams and boost the overall economy of the nation. A 100% tax will be introduced for tobacco products, alcohol, meat and energy drinks whilst a 50% tax will be implemented on carbonated drinks. Below is the list of excise tax products and the respective tax rates:

  • Tobacco and tobacco derivatives – 100%
  • Carbonated drinks – 50%
  • Energy drinks – 100%
  • Alcohol – 100%
  • Pork Products – 100%

A detailed guide has been released by the Oman Secretariat General for Taxation, below we cover certain highlights of this guide:

  • The tax will be implemented on the standard product price or the higher retail price, this will be determined by the tax payer.
  • Companies involved in activities which sell, import, buy, manufacture or retail affected products must register for the tax via the SGT portal.
  • Businesses that have stock of products subject to tax implementation and who use these goods for commercial purposes must submit a Transitional excise tax return. You must declare the value and quality of these products at the time of Excise tax implementation and submit the tax return within 15 days of the effective date the law was implemented.
  • Any companies who are involved in manufacturing, importing or storing these Excise products must review their registration requirements as soon as possible. Re-pricing and IT system updates need to be reviewed to include the calculation of the tax.

Will Your Business be Impacted?

The new tax will impact companies which manufacture, import or trade the products which are affected by the tax implementation and other businesses such as retailers, hotels and restaurants which have stock of these products could also be significantly impacted. If your business falls into one of these categories, what actions do you need to take?

First and foremost, to not be negatively impacted, you must act quickly to:

  • Evaluate and really understand what the impact could be in relation to:
    • Product stock
    • Cash flow
    • Supply chain process
    • Contracts in place
  • Evaluate the effect of the new tax on time management and IT Systems:
    • Changes required in the PoS
    • Contract updates
    • Staff time for re-pricing

For more information on Excise Tax in Oman, contact PRO Partner Group on +971 (0)4 456 1761 or email info@propartnergroup.com. Alternatively, you can me directly at natalia@propartnergroup.com.


What is a share transfer in the UAE, how to do a share transfer in the UAE, Dubai Abu Dhabi

Why having a Corporate UAE Shareholder is beneficial for share transfers

What is a corporate shareholder?

In the UAE you can opt to have a corporate partner or sponsor rather than an individual. In the case of a corporate shareholder, a 100% UAE owned national company (Local Sponsor) holds a 51% share in the mainland LLC company and the remaining 49% is owned by an individual, corporate or group of foreign investors. In this type of sponsorship, the business is sponsored by a company, rather than an individual.

The same is true when the local partner is acting as the National Service Agent (NSA) or Local Service Agent (LSA) for Foreign Branch or an Establishment.

Why is it beneficial to have a corporate shareholder/sponsor?

Having a corporate shareholder as a sponsor is advantageous specifically to protect the 49% shareholder’s interests, specifically related to succession protection; ease of exit/share sale; more robust legal protective documents; PRO support and overall reliability.

What is a share transfer?

The shareholders of a Limited Liability Company (LLC) each own a percentage of the business, if they want to sell the shares or change the percentage of ownership or add new shareholders the process of transferring shares already in existence is known as a Share Transfer.

To ‘change local partner’ this involves a share transfer of the 51% of the shares to a new local partner. Currently under UAE law 51% of the shares of an LLC must be held by a Local Emerati National or a 100% Owned Emerati company – so the 49%:51% shareholding ratio must be maintained. Note that the new FDI rules will allows applications to apply for a higher percentage of forrign ownership – please see our FDI article for more information: FDI UAE

Why would a share transfer be required?

There are many circumstances where a share transfer is required, this includes; a shareholder leaving the company, a new shareholder is invited to join, the death of a shareholder, the whole company is sold to a new owner, transferring of shares to existing shareholders.

What is the legal process for a share transfer?

Below is a step by step guide of how a share transfer is executed regardless of the reason of the transfer of shares:

Step One: Draft a Board Resolution (BR) or Shareholder Resolution (SR)

A Board or Shareholder Resolution and Power of Attorney from the board of the LLC or the shareholders in the LLC is required. If the Shareholders are themselves corporates then and BR / SR from the parent companies is also required. The following documentation is required to complete this step:

  • Parent company(s) Certificate of Incorporation
  • Parent company(s) Memorandum and Articles of Association
  • Certificate of Incumbency
  • Memorandum and Articles of Association of the LLC
  • Trade Licence of the LLC

Foreign Company documents will need to be Attested in the Foreign Country jurisdiction through the UAE Embassy and through the Ministry of Foreign Affairs (MOFA) in UAE.

  • Step Two: Complete the Application Form to the DED

A DED application form needs to be completed in Arabic, the buyer, the seller and the manager of the LLC company must sign the document and must it be sealed with the LLC company stamp.

  • Step Three: Submit the Application Form to the DED

Once the application form has been submitted to the DED along with the required supporting documents (mentioned below), you will wait for initial approval from the DED which normally takes 1 to 8 business days.

Documents required for the buyer/seller (corporate):

    • Completed DED Registration and Licensing application form
    • Trade Licence/Certificate of Registration copy
    • Memorandum of Association
    • Articles of Association copy
    • Notarised board/shareholder resolutionDocuments required for the buyer/seller (individual):
    • Passport copy
    • Emirates ID copy (if a UAE resident)
    • Details of the Unified ID Number (UID)
  • Step Four: Prepare Required Legal Documents

A short-form Share Transfer Agreement (STA) and an Amendment to the Memorandum of Association (AMOA) of the company will need to be prepared. This document must be in Arabic or be bilingual, if bilingual, the document must be attested by a legal translator and stamped by the Ministry of Justice.

  • Step Five: Execute the Share Transfer

The Share Transfer Agreement will need to be executed before the Notary Public – signed by all parties.

  • Step Six: Submit the Share Transfer Documents to the DED

Once the Share Transfer Agreement has been notarised, this along with the initial DED approval and supporting documents should be submitted to the DED.

Documents required:

    • Share Transfer Agreement (STA) – Signed by all parties
    • Amended Memorandum of Association (AMOA)
    • Incoming and exiting Shareholder(s) IDs / Corporate Documents and POA
    • Parent companies Trade Licences
  • Step Seven: Advert to be Placed for 14 Days

Once you have submitted the Share Transfer documents to the DED, you will receive a DED Authorization letter which should be used to place an advert in the Gazette for 14 days publicising the change of shareholder(s). The 14 day Gazette period is only a requirement in Abu Dhabi and other Emirates, not in Dubai.

  • Step Eight: Apply for an Amended Trade Licence from the DED

Once the fees are paid, and all approvals are in place you need to apply for a new trade licence which includes the new shareholders or change in share holding capacity.

  • Step Nine: Amend other licences

Once the DED Trade Licence has been updates then the LLC may need to update the other licences for the LLC – particularly Ministry of Labour (MOL), Immigration (MOI), Ministry of Economy (MOE) and Chamber of Commerce. Other Licences and regulatory bodies will also need to be notified and updates as will the bank and potentially other counterparties.

 

How can PRO Partner Group Assist?

PRO Partner Group can facilitate transfer of shares within an LLC – facilitating the change of a foreign shareholder or the local shareholder – it is a straightforward process.

Additionally PRO Partner Group provides a Corporate Nominee Service where we can become the secure corporate 51% shareholder allowing us to undertake the share transfer process. PRO Partner Group provides comfort to the foreign investor by providing, full management control and a no penalty exit / sale / transfer clause and full transparency should the Foreign partner will to change to a new partner in the future, or if through FDI regulations the Foreign partner is able to hold more than 49% of the shares.

For more information on Corporate Sponsorship and Share Transfer please contact a member of the team on info@propartnergroup.com in Abu Dhabi +971 (0)2 448 5120, or Dubai +971 (0)4 456 1761, or contact me Greg Hastings direct on greg@propartnergroup.com or +971 (0)56 991 1278.


UAE VAT Update

VAT Update

Importation of Goods by Agents on Behalf of VAT Registered Persons.

A new public clarification has been announced by the UAE Federal Tax Authority (VAT Public clarification – VATP012) referring to the importation of goods by agents on behalf of VAT registered persons. The following clarifications were announced:

  1. This is relevant where a VAT registered agent imports goods on behalf of the owner of the goods who is also VAT registered. In some circumstances, the importing agent will have their own TRN number at the time of import and the VAT amount would have been auto-populated.
  2. The clarification covers the adjustments which should be made in the VAT returns of the importing agent and the owner of goods.
  3. There are two ways in which this adjustment can be made:
    • The importing agent and owner both make an adjustment in Box 7 (Adjustments to goods imported into UAE). Importing agent makes a negative adjustment to nullify the amount of auto-populated Box 6 figure in the VAT return. Owner of the goods makes a positive adjustment in Box 7 to include the value of the goods imported on its behalf by the importing agent. And, the owner would be entitled to recover the import VAT (declared in Box 7) in Box 10 as per its normal VAT recovery position. Under this option, the importing agent and owner need to have written an agreement to make these adjustments and must retain this agreement along with customs documentation.
    • The importing agent issues a statement to the owner compliant with Article 50(7) of the UAE VAT executive regulations, which will be considered as a Tax invoice allowing the owner to recover Input tax in Box 9 (Standard rated expenses) of the VAT return

Information in this blog has been obtained by our professional Partner, Premier Brains Accounting & Auditing. – qualified finance professionals and business advisors. For more information on VAT in the UAE, contact PRO Partner Group on +971 (0)4 456 1761 or email info@propartnergroup.com. Alternatively, you can me directly at jess@propartnergroup.com.

 


UAE Economic Substance Regulations

Complying with the new UAE Economic Substance Regulations

In March 2019, the European Union (EU) published an updated blacklist of non-cooperative tax jurisdictions, which included the UAE for not delivering on its commitment to comply with the EU’s good governance criteria.

Since then the UAE has issued new legislation under Cabinet Resolution No. 31 of 2019 which specifies the requirements for companies to have economic substance and an actual presence in the UAE. Although the Resolution was published on 19 June 2019, compliance with the requirements has been in force since 30 April 2019. The anticipated removal of the UAE from the EU’s blacklist will be welcomed by international investors and financial institutions alike.

The key impact of the Resolution is the obligation of companies carrying out Relevant Activities to meet the specified economic substance requirements and to conduct annual compliance reporting.

Who does the Resolution apply to?

Under the Resolution, the economic substance requirements apply to companies that generate income by carrying out the following Relevant Activities in the UAE, whether onshore or in the Free Zones, including the Financial Free Zones:

  1. Banking;
  2. Insurance services;
  3. Investment fund management;
  4. Finance leasing;
  5. Headquarter activities related to (i) conducting management decisions; (ii) incurring operational expenditures on behalf of group entities; and (iii) coordinating group activities;
  6. Shipping;
  7. Intellectual property services;
  8. Holding company activities; and
  9. Distribution and service centre activities.

The Key Obligations of a Business in the UAE

To have economic substance and hold a trade licence in the UAE, either onshore or in a Free Zone, the key obligations imposed on UAE companies under the Regulations are as follows:

  1. The company must conduct its core income-generating activities in the UAE;
  2. The company must be managed and directed within the UAE in relation to the its business activity – i.e. it must hold board meetings and AGMs, with a quorum of directors physically present and signing in the UAE;
  3. It must have an adequate number of full-time employees, incur expenses and have physical assets for carrying out the relevant business activities in the UAE; and
  4. It must demonstrate that it controls the execution of activities which have been outsourced to third parties.

Companies carrying out relevant changes, must submit an Economic Substance Report annually. The Company has an annual obligation to prepare and submit to the Regulatory Authority a detailed report to evidence that the Company satisfies the economic substance requirements. The Report should include:

  1. The value and type of revenue related to the relevant activities;
  2. The location of the activities and the property and/or equipment used to conduct the activities;
  3. The number of employees, their qualifications and the number of people responsible for conducting the activities; and
  4. A disclosure stating that the company has met the economic substance requirements.

The relevant Regulatory Authority where the Reports are to be submitted will be clarified by a further Cabinet resolution.

For entities such as Foreign Branches and Representative Offices which do not have a board and whose management is carried out by a single manager, that manager must be physically present in the UAE when making the main decisions concerning administration and operation of that entity.

Holding companies will have less extensive requirements and will satisfy the requirements if they submit their relevant information to the competent authority, and if they have sufficient staff and premises to carry out the work of a holding company.

The legislation states that further guidance will be issued to assist companies in meeting the economic substance requirements.

What if a Business in the UAE Does Not Comply with the Regulations?

Companies in the UAE carrying out Relevant Activities must file their first Report within 12 months from the end of their fiscal year. Thereafter, there will be an annual reporting requirement. As the rules came in on 30 April 2019, the first Reports for existing companies should be done in 2020.

Non-compliant companies could risk fines and penalties, suspension, withdrawal or non-renewal of licences, and the disclosure of their position to other foreign authorities.

If the company does not comply with the Regulations, they will face the following:

  1. If the Report indicates non-compliance with the Regulations, the UAE Ministry of Finance shall disclose information of the Company to the foreign authorities in the country in which the parent company and/or the ultimate beneficial owner of the Company is resident.
  2. If the Company does not comply it will face the following financial penalties:

a. If a Company fails to meet the Economic Substance Test for one financial year, a penalty of between  AED10,000 and AED50,000 can be imposed by the Regulatory Authority. Repeated failure to meet the Economic Substance Test may lead to penalties of up to AED300,000; and

b. Companies who fail to provide information or provide inaccurate information may be subject to an administrative penalty of between AED10,000 and AED50,000.

3. Non-compliance may eventually also result in commercial licence suspension, withdrawal or non-renewal.

It is important for UAE Companies – both in the mainland and Free Zones – to understand the economic substance requirements and the obligation to annually prepare the Report and file it with the Relevant Authority.

Outsourcing to Third Party Service Providers

The legislation does envisage that corporate entities may appoint a third party to fulfil some or all their economic substance requirements, but in doing so the corporate entity must be able to show it has full control over the activity designated to the third party.

For many UAE headquartered companies and foreign multinationals that undertake genuine business activities within the UAE, the new legislation will have a limited impact, save for imposing additional reporting requirements for which they should await supplementary guidance with regards to the form, content and timing of reporting.

Companies who conduct Relevant Activities within the UAE but which are managed from outside of the UAE should ensure that management is conducted in accordance with the requirements of the legislation. Companies without sufficient operations and management in the UAE to meet the new standards of economic substance should consider conducting core activities within the UAE whilst moving operating assets and expenses into the UAE to ensure compliance.

It is vital to assess your existing level of economic substance in the UAE and how you can start to comply with the new Regulations. The key areas of your operation that the Regulations may impact concern corporate structuring and tax aspects.

How can PRO Partner Group help?

PRO Partner Group is the leading company formation support specialist in Abu Dhabi and Dubai. We specialise in setting up and supporting foreign businesses in the UAE providing secure Local Partner, National Agent and PRO services – establishing companies and assisting in managing their staffing, visas and back office needs and operations.

PRO Partner Group can assist to ensure that your AGM and annual corporate governance and compliance requirements are in place and further advise on the economic substance guidelines and reporting as they become clearer.

For more information please contact a member of the team on info@propartnergroup.com; telephone our Abu Dhabi office on +971 (0)2 448 5120 or our Dubai on +971 (0)4 456 1761. Alternatively, you can me directly at jim@propartnergroup.com or on +971 (0)56 991 1278.


UAE Cuts Government Fees significantly across most Ministries

In the effort to ease cost of doing business in the UAE and to enhance interest by foreign investors, the UAE has reduced fees from 50% to 94% in certain ministries, specifically employment related costs.

As of 1st July 2019 the UAE cabinet issued a decision to lower or cancel fees on 1,500 federal services. This measure is aimed at ensuring fees are comparable to international best practices.

The decision comes as part of many other reforms to help attract foreign investors, create jobs and establish the UAE as a global business hub. Recently, the UAE has permitted 100% foreign ownership of businesses in 13 different sectors, including, manufacturing and renewable energy. In addition, SME’s have been offered small incentives and visa restrictions have been eased – these moves are to diversify the economy away from oil and tourism.

The recent announcement concerning fee reduction or cancellation effects the Ministry of Interior, the Ministry of Economy and the Ministry of Human Resources and Emiratisation. The Ministry of Human Resources includes many services including; work permits, employment contracts and training permits plus many more. The new fee structure is currently being implemented through service centres – Tas’heel, Tadbeer, Tawafuq and Tawjeeh. Below is a list of new fees for work permits in all categories:

UAE Work Permit Fees Dubai Work Permit Fess Abu Dhabi Work permit Fees

The Ministry of Human Resources and Emiratisation has explained that the revised costs for issuing new work permits is in line with a new classification system based on workers skill level. To enhance the push for Emiratisation within the private sector, the ministry will continue to exempt work permit fees for Emirati or a GCC national employees. By reducing operational costs of businesses regarding labour and recruitment, the UAE hopes to promote the country to interest new investors and support entrepreneurship. Other fees which have been officially released include; two-year work permit issuance; two-year work permit renewal; two-year work permit issuance for those sponsored by parents; two-year employee transfer permit:

Two Years UAE Work Permit Fees Dubai Work Permit Fess Abu Dhabi Work permit Fees

Two Years UAE Work Permit Fees Dubai Work Permit Fess Abu Dhabi Work permit Fees Sponsored by Parents

Two Years UAE Work Permit Fees Dubai Work Permit Fess Abu Dhabi Work permit Fees from one establishment to establishment in the UAE

Ministry of Economy fees reduction

In addition, the Ministry of Economy (MOE) has announced new fee structures for around 110 services as part of Cabinet Resolution 51 of 2019. According to the Ministry of Economy’s official website many service fees will be reduced by 50 percent.

Amongst the changes the registration and renewal of Trademarks for Foreign Companies has been cut to from AED 10,000 to AED 6,700, fees for Agent and Appointed Representative disputes have been reduced from AED 12,000 to AED 8,040.

In addition the registration fee for Foreign Branches has been reduced from AED 15,000 to AED 10,050, the fees for publishing official announcements by foreign private joint stock companies has been cut from AED 20,000 to AED 10,000 and the fee of sale or merger of foreign companies has been cut from AED 15,000 to AED 10,050.

Sultan bin Saeed Al Mansouri the Minister of Economy, said that the latest amendments will provide a boost to the business community in the country as the cost of conducting trade and investment activities will drop for both Emiratis and resident business owners, including large, medium and small enterprises. The latest move comes within a series of policies and resolutions decided by the federal and local governments to stimulate and strengthen economic growth, provide new incentives to increase the attractiveness of the local business climate, generate more job opportunities and promote the UAE as a favoured investment destination which supports economic growth and advances UAE rankings on the global competitive indexes.

Al Mansouri emphasised the ministry’s keen desire to create a business-friendly environment where private sector companies can grow and flourish.

For more information contact Jim Swallow on jim@propartnergroup.com


UAE FDI LAW 100% Foreign Ownership Positive List

100% Foreign Ownership – Positive List Released

UAE FOREIGN INVESTMENT LAW – 100% Foreign Ownership – Positive List Released

Following the release of the UAE Federal Law No. 19 of 2018 on Foreign Direct Investment, the UAE Cabinet has now announced the Positive List of activities covered by the FDI Law.

The cabinet has approved 122 economic activities across 13 sectors that will be eligible for up to 100% foreign ownership. These sectors are as follows:

  1. Administrative and support services
  2. Agriculture
  3. Art and entertainment
  4. Construction
  5. Educational activities
  6. Healthcare
  7. Hospitality and food services
  8. Information and communication
  9. Manufacturing
  10. Professional, scientific and technical activities
  11. Renewable energy
  12. Space
  13. Transport and storage

This will open up 100% ownership for international companies and investors looking to explore the UAE market particularly with a focus on sectors involving renewable energy, green technology, biotechnology, solar hybrid and green technology production, research and development, logistics and supply chain and e-commerce.

What are the criteria for FDI applications?

General criteria include the size of the investment in the UAE, share capital requirements, and the number of employees to be hired by the business. These criteria will be reviewed on a case by case basis by the relevant authorities in the Emirate where the company is based.

For activities in manufacturing a guideline minimum share capital requirement of between AED 3million and 100milion has been given. Hospital and Hypermarkets guidance has been given at AED 100milion share capital requirement. Other sectors such as construction, engineering, transport, education, medical and dental clinics guidance has been given that share capital should be in line with applicable local laws.
Companies applying for 100% foreign ownership will need to appoint a UAE National (or a 100% UAE owned company) to act as a National Service Agent (NSA) for Immigration and Ministry of Labour matters

For companies that are not on the positive or negative list sectors – such as retail, real estate activities, F&B and hotels, the process is not yet clear. It is still likely that approvals may be granted to these sectors on a case-by-case basis at the discretion of the relevant authorities.

The UAE Cabinet has further confirmed that it will be left to the discretion of the local Emirate governments decide on the percentage of foreign ownership for each sector/ activity. Note that the guidance states that its is up to 100% ownership this any mean that lower percentages than 100% are allowed, but over the 49% currently allowed – for example 70% foreign ownership may be given in certain cases.

At this stage only Dubai Department of Economic Development (DED) has accepted applications made by businesses under this FDI Law. The Dubai DED has already registered new companies and converted existing companies to become 100% foreign owned. Applications at Dubai DED in Dubai have been assessed on a case-by-case basis. We expect this will now extend to Abu Dhabi and other Emirates soon.

This announcement represents a much-awaited step towards the development of foreign investment regulations in the UAE. It is expected to considerably boost the level of FDI in the UAE as a whole and cement the role of the UAE as a global business hub for foreign investments.

For companies awarded increased foreign ownership as an FDI Company the benefits are extensive and include the following:

  1. FDI Companies licensed under the FDI Law shall be treated as UAE National Companies under UAE and international agreements.
  2. FDI Companies shall be guaranteed confidentiality of technical, economic and financial information compliant with UAE laws and international treaties.
  3. FDI Companies may transfer their earnings and proceeds outside the UAE.
  4. Employees of FDI Companies may transfer their salaries and entitlements outside the UAE.
  5. FDI Companies, subject to approval, can add shareholders, sell the business, change their legal form or enter into a merger without losing the privileges awarded to them under the FDI Law.

For existing UAE Companies looking at the new FDI it may be prudent to review current arrangements with local partners to ensure that they can facilitate the process and share transfers when required.

How can we help?

PRO Partner Group is the leading company formation support specialist in Abu Dhabi and Dubai. We specialise in setting up and supporting foreign businesses in the UAE providing secure Local Partner, National Agent and PRO services – establishing companies and assisting in managing their staffing, visas and back office needs and operations.

Where PRO Partner Group acts as the local shareholder we will always ensure that there is and exit / sale strategy for companies where we act as the 51% shareholder ensuring that companies can acquire an increased percentage of their shares at no penalty if they are awarded FDI status. Additionally, PRO Partner Group can continue to act as the Local National Service Agent (NSA) to continue to assist with Labour and Immigration matters.

PRO Partner Group can assist with FDI applications for existing partnered companies and new companies looking to apply for up to 100% ownership.

For more information please contact a member of the team on info@propartnergroup.com in Abu Dhabi +971 (0)2 448 5120 ,or Dubai +971 (0)4 456 1761, or contact Greg Hastings direct on greg@propartnergroup.com or +971 (0)56 991 1278.